Correlation Between SPORT LISBOA and PT Bank

Can any of the company-specific risk be diversified away by investing in both SPORT LISBOA and PT Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SPORT LISBOA and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPORT LISBOA E and PT Bank Rakyat, you can compare the effects of market volatilities on SPORT LISBOA and PT Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SPORT LISBOA with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORT LISBOA and PT Bank.

Diversification Opportunities for SPORT LISBOA and PT Bank

0.19

Correlation Coefficient

SPORT LISBOA  PT Bank

Average diversification

The 3 months correlation between SPORT and BYRA is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding SPORT LISBOA E and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat and SPORT LISBOA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SPORT LISBOA E are associated (or correlated) with PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of SPORT LISBOA i.e., SPORT LISBOA and PT Bank go up and down completely randomly.

Pair Corralation between SPORT LISBOA and PT Bank

Assuming the 90 days horizon SPORT LISBOA is expected to generate 3.07 times less return on investment than PT Bank. But when comparing it to its historical volatility, SPORT LISBOA E is 2.32 times less risky than PT Bank. It trades about 0.01 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  28.00  in PT Bank Rakyat on September 12, 2024 and sell it today you would lose (1.00) from holding PT Bank Rakyat or give up 3.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SPORT LISBOA E  vs.  PT Bank Rakyat

SPORT LISBOA E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPORT LISBOA E has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SPORT LISBOA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PT Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPORT LISBOA and PT Bank

The main advantage of trading using opposite SPORT LISBOA and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORT LISBOA position performs unexpectedly, PT Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PT Bank will offset losses from the drop in PT Bank's long position.

The idea behind SPORT LISBOA E and PT Bank Rakyat pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.